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Utilization rates and maximizing large spends

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Moderator

Re: Utilization rates and maximizing large spends


@nihliphobe wrote:

The report currently shows me at 0% utilization and 0 credit, even with the 9.5k debt.

 

I will look into the limit on that card, but as you said, it's likely a net benefit anyways. I don't have full control over that utilization amount, as the current debt on that card is my folks. I haven't used that card in years myself.


If you drill down on the account, it should show the last statement balance and the credit limit. (Unless this is a charge card like Amex Gold or Platinum? May have missed that.) If it is showing you as 0% utilization, either the display is incorrect or it’s a charge card.

 

Is your Capital One card showing on your reports or is it too new?


Message 11 of 18
Super Contributor

Re: Utilization rates and maximizing large spends


@nihliphobe wrote:

The report currently shows me at 0% utilization and 0 credit, even with the 9.5k debt.

 


Well, that doesn't make any sense.  What type of card is this?

Message 12 of 18
New Member

Re: Utilization rates and maximizing large spends

K-In-Boston you are 100% correct, it is an Amex gold card. I'll do some research on charge cards, I'm not sure what those are currently, but it sounds like I have one. 

My apologies for the trickle information, I will strive to give you guys the full picture in any future posts.

The cap1 card hasn't shown up on my reports yet, hopefully soon!

Message 13 of 18
Community Leader
Senior Contributor

Re: Utilization rates and maximizing large spends

Charge cards require the balance to be paid off monthly. Because they have no preset spending limit the way a revolver does, they don’t factor into utilization. They affect your score via payment history. When your new card reports, you’ll likely see your scores go up - many of us reported score increases when opening our first 2-3 cards. Allowing a small balance, maybe $10, to report on your new card will gain you some points too, as FICO scores take a hit when no balances are reporting, under the idea that basically your debt management skills can’t be assessed perfectly if you’re not managing any debt.


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Message 14 of 18
Super Contributor

Re: Utilization rates and maximizing large spends

Then, actually, you already probably have the credit tool you need to answer your opening question.  An AMEX Gold card has no preset spending limit.  The amount you can charge on it depends on your spending patterns. This may include your parents spending habits, but that level of detail does not turn up often, so it seems a stretch that it benefits an Authorized User spending limit.  

 

You should be able to run a substantial amount of your wedding expenses through the Gold card Authorized User account. 

 

The amount you charge each month is due in full soon after the statement prints, but the amount you charge on the Gold card does not impact your utilization measure on FICO scoring.  With the CapOne card, that $2k limit will quickly reach high utilization, leading to the need for frequent payments during the month if you want to keep statement-reported utilization reasonable.  

High Bal Jan 2009 $116k on $146k limits 80% Util.
Oct 2014 $46k on $127k 36% util EQ 722 TU 727 EX 727
April 2018 $18k on $344k 5% util EQ 806 TU 810 EX 812
Jan 2019 $7.6k on $360k EQ 832 TU 839 EX 831
Message 15 of 18
Moderator

Re: Utilization rates and maximizing large spends


@nihliphobe wrote:

K-In-Boston you are 100% correct, it is an Amex gold card. I'll do some research on charge cards, I'm not sure what those are currently, but it sounds like I have one. 

My apologies for the trickle information, I will strive to give you guys the full picture in any future posts.

The cap1 card hasn't shown up on my reports yet, hopefully soon!


No need for apologies; I'm just glad the thought popped into my head.  Given that it is a charge card, everything makes perfect sense now and the displays are correct.  The card is certainly helping you by having an aged account in good standing and whatever the balance is should not affect you (which would not be true if it were a revolving card).  The most common charge cards are the Green, Gold, and Platinum cards from American Express.  Because they are charge cards, they are not treated the same as a credit card with a revolving limit (although most people do have a feature called Pay Over Time on these cards that allows you to revolve a balance, so the lines are a bit blurred).

 

Credit mix is one of the key parts of credit scoring, and having revolving credit cards is generally necessary for a great score.  Additionally, the amount of utilization of revolving accounts is another big part of scoring.  If you show $0 of use on your credit reports, you are a higher risk than someone showing a small balance, or balances, because they cannot assess how you handle revolving credit.  As mentioned, once your new Capital One shows up on your credit reports, you should see a decent score boost especially if you can ensure that your statements on the card close with at least a $5 balance but less than about $575 (there is a score penalty at 30% utilization, and due to rounding 29.00000001% becomes 30%).  That doesn't mean you need to carry a balance and accrue interest, just use the card as normal, pay it down mid-month if needed, but make sure that the day that your statement generates (I believe CapOne makes it prominent in your online account with "Next closing date" or something like that) your balance is between those parameters.  Once that happens, you really should be in a good position to start considering which credit cards may make sense for you to apply for that will benefit you long-term.  Credit is a marathon and not a sprint, but in this analogy you can consider that Amex Gold card to be your years of training and the CapOne reporting to be the starting pistol for your credit marathon.

 

The previous denial with Barclay also makes sense now; in addition to them being known as a somewhat conservative lender you were essentially asking them to issue you your very first credit card.  Keep in mind that some lenders' internal scoring methods will also exclude any authorized user history as well.


Message 16 of 18
Valued Contributor

Re: Utilization rates and maximizing large spends


@NRB525 wrote:

Yes, you can pay off charges on any credit card after they move from Pending to Posted. With Capital One they are as good as any for getting the payments cleared. 


It's not a big issue, but one of my gripes with Cap1 is tnhat you cannot pay more than $9 over the current balance. Even if there is a pending charge. With Amex I can pay over in the amount of the pending charge.

 

 

OP I am somewhat surprised that you were able to make it all through College without ever applying for a CC, so kudos for resisting that temptation for so many years. It seesm to be the norm for so many kids once they reach 18-20 to immediately app for credit.






Message 17 of 18
New Member

Re: Utilization rates and maximizing large spends

Got it. I'll wait for the cap1 score bump to post, and in the meantime, I'll start browsing around here to see what sort of products I should be looking for once my score is in order.

 

Thanks so much to everyone in this thread, I learned a lot. Your help is very much appreciated!

Message 18 of 18
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